Decline in the volume of global commercial property transactions
The latest market report from Jones Lang LaSalle shows that sales of global commercial property have gone down with 23% since the beginning of 2012, transaction volumes currently amounting to $75 billion. However, it’s not all bad news on the property market; the underlying attractiveness of real estate continues due to strong demand and sound fundamentals.
The last quarter of 2011 showed a very active desire to close deals. However, it will be difficult to reach the extent of such activity in 2012, at least not in the first quarters.
This fall in the volume of transactions in the first three months of 2012 can be partly explained by the lack of significant individual transactions in established markets, which would have single-handedly enhanced volumes. Another reason may be the continued economic pressures restricting the availability of debt finance, especially for new borrowers.
The Asia Pacific came out as the biggest ‘winner’ in 2011, as it was the strongest year on record with annual volumes at US$98 billion, what is more experts expect performance to improve during the upcoming months as monetary and fiscal policy is gradually loosened around the region.
Sales volumes on the US market also continue to improve with a 16% increase since this time last year and Canadian and Mexican volumes went up more than 50% over the same period.
Major world cities such as London and New York still attract large amounts of capital, however experts expect in 2012 investors to turn to the increasing number of opportunities in secondary markets as pricing in this area continues to adjust.
Although investors remain somewhat cautious, their sentiment is positive and they continue to execute their strategies albeit with longer transaction times and more detailed underwriting. Commercial property still draws capital and interest from institutional investors, increasingly through allocations diverted away from equities, commodities and other asset classes.
From Jones Lang LaSalle believe that for 2012 to financially surpass 2011 we would need more debt available globally and a sustained increase in activity in secondary markets.
